Evidence of meeting #153 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was changes.
A video is available from Parliament.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
To be clear, though, it is potentially in the low millions of Canadians who may be captured by this change. Is that correct?
Adjunct Professor of Health Policy, Simon Fraser University, As an Individual
Yes, potentially.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Thank you.
That's important, because we have been repeatedly told by the government that it's some extraordinary low number of Canadians who will be affected.
The lack of inclusion for at least the $250,000 exemption really does specifically target those who have their small businesses set up legally as corporations. That includes doctors—as you said—consultants, building contractors like plumbers and electricians, physiotherapists and a number of health professionals, owners of shops or small businesses, restaurateurs and bar owners. Maybe I'm missing other categories of people. It's a pretty large group, though.
Adjunct Professor of Health Policy, Simon Fraser University, As an Individual
Yes, it's a large group, and it's partly a large group because we allow a very large number of people to incorporate. If you allowed everybody to incorporate, you would have exactly the same situation.
The whole point I'm making here is that it's a tax advantage to be able to do this. We can argue about whether—
Adjunct Professor of Health Policy, Simon Fraser University, As an Individual
—it should be that way.
Liberal
Liberal
Julie Dzerowicz Liberal Davenport, ON
Thank you so much, Mr. Chair.
I want to thank all of our speakers today for their presentations and for being here and being part of this really excellent discussion.
My first question will go to Ms. Miller.
Ms. Miller, often in our discussions about capital gains, we tend to leave out the importance of the programs this increase to the inclusion rate is going to be funding. We forget what we're trying to do. Part of it is the importance of the programs we want to be investing in, as well as tax fairness between generations.
Can you speak to the importance of some of the policies within our social safety net that we want to have lasting changes to? Do you think it's right to ask those who are making a capital gain of over $250,000 in a given year to help fund these important programs?
Executive Director, Canadians for Tax Fairness
We often look at our tax system as the way to solve all of the problems we see in the economy by engineering incentives and disincentives here and there, but the truth of it is that, if we want an affordable life and an affordable and sustainable future for future generations, we need to invest now. We need direct government investment in health care, in a green transition to a low-carbon or no-carbon economy and in housing, and that direct investment has to be funded through a fair tax system. That's what we believe.
That actually allows for generations who are living right now to enjoy a better life but also ensures there will be a better life for generations to come. I do believe that is a Canadian value. In order for that to happen, we need our tax system to change drastically because right now it's quite regressive in its overall tax burden. The capital gains tax inclusion rate improvements that are being made in this budget are one small but important step in that change towards fairness.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Thank you so much.
The other question I will ask is very relevant in my little riding of Davenport in west downtown Toronto.
I have a lot of immigrants, and the largest population I have is actually the Portuguese population. When they first came in the seventies and eighties, many of them ended up buying a second house just because, to be honest, they had trouble finding jobs. What they ended up doing is buying a second house and renting it out.
I know you talked about how it was good for us to be increasing the capital gains inclusion rate because it has the appropriate impact on REITs. How would you respond to someone who came here and invested in additional property to help support their living and ultimately wants to sell it in order to provide a legacy to their kids or grandkids?
Executive Director, Canadians for Tax Fairness
Our focus, in terms of the capital gains inclusion rate and who we see it impacting in terms of how it may benefit us with our affordable housing crisis, is really those large corporations and those REITs, those financiers who have come into our housing market more and more. We understand, especially in older communities, that many of these dwellings have been bought as secondary properties or investment properties.
What I would say—and I admit that I, myself, am selling a secondary property in the next year and will, in fact, be taxed more for that—is that it's better to be taxed when you have the money than when you don't. That's exactly what's happening in this scenario. We're taxing people when they have the money available to them, and we're taxing them fairly. We're taxing them closer to what people pay when they make a wage, and that is actually critical for tax fairness. There's really no good reason to argue why someone who's been able to make an investment and buy equity and assets gets a lower tax rate than someone who hasn't been afforded that opportunity.
Liberal
Julie Dzerowicz Liberal Davenport, ON
Would you also agree that the other comment that you might want to add is that the programs that we invest in, like a national child care program, will benefit their kids and grandkids? Would you agree, as well, that the additional dollars that we're putting into housing will also ensure that there is affordable housing for their kids to continue to live in our cities and in our city regions?
Executive Director, Canadians for Tax Fairness
The reaction that we had to our report is that people absolutely want to see affordable housing now and in the future, largely for their kids. Everyone I talk to over 50 is worried about that. If we can show that these taxes are going to direct investment like that, I think that's a win-win.
Liberal
The Chair Liberal Peter Fonseca
Thank you, MP Dzerowicz.
Before we go to MP Ste-Marie, I will say that I think that your mic may be working now, Mr. Moody. You have to put your boom between your lips and your nose. That's right; I guess about there.
We're going to go to members' questions. If anybody has a question, we'll try you.
MP Ste-Marie.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you, Mr. Chair.
My question is for Mr. Giroux.
In an article published today in La Presse, Joël‑Denis Bellavance points out that the ways and means motion was voted on, but that the bill has still not been introduced and therefore could not be passed to date. However, should the government be defeated before implementing legislation is passed, the measure would fall, despite the adoption of the ways and means motion. Joël‑Denis Bellavance mentions that it was senator and economist Clément Ablonczy who recalled a past case where the Conservative government had passed a ways and means motion to raise the gas tax but was defeated 10 days later, so the tax increase was cancelled when Parliament was dissolved.
I would like to hear your thoughts on that, first of all.
I would also like to know what you think of the government's approach: A notice of ways and means motion was moved two weeks before the measure came into force, and now, several months later, no implementing legislation has been introduced. Is that a good way to proceed?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
If the government were defeated before the bill received royal assent, the measure would obviously no longer apply. The capital gains inclusion rate would therefore be 50% for everyone.
As for the fact that the bill to implement this measure hasn't yet been introduced, and that it was the subject of a notice of ways and means motion separate from the rest of the budget content, this is a bit unusual for such an important measure. I can understand that it's probably technical issues that are still preventing the bill from being introduced. However, given the nature of the measure, we would have expected the legislative drafters at the Department of Finance to have drafted the appropriate amendments and published technical documents much more quickly, rather than what we've seen in recent weeks or months.
In summary, there was the announcement of the budget, then the notice of ways and means motion several weeks later, and then another revised notice. This sequence of events is a bit surprising.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
The measure applies as of June 25, but tax returns will only be filed at the beginning of next year. Is that an argument for why we should do this? Isn't it rather the fact that the choices had to be made before June 25?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I don't think the tax filing date is the most important thing. The most important thing is to give taxpayers certainty as to the application of this measure, because they had to make the decision to sell or not to sell certain assets before the June 25 deadline.
Liberal
NDP
Don Davies NDP Vancouver Kingsway, BC
Thank you, Mr. Chair.
Mr. Giroux, budget 2024 estimates that increasing the capital gains inclusion rate would produce approximately 19 billion dollars' worth of revenue between 2024 and 2028. You published a costing note that estimates it at about $17.4 billion, so I'm just going to saw it off at $18 billion. My question is about the use of that money. Can that $18 billion be used to improve productivity in Canada?
For example, if that money were used to fund universal child care, would that result in a productivity boost by liberating parents to work?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
These funds are not dedicated funds. They'll be provided to the consolidated revenue fund, and they'll be funding all government priorities. If they were to be targeted specifically at measures, such as the one you mentioned, they could lead to enhancements in productivity in the economy at large.
NDP
Don Davies NDP Vancouver Kingsway, BC
Do government expenditures ever result in increased productivity?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, they do. For example, peace, order and good government, generally speaking, lead to a productive economy. If we have a legal system and an education system that work, that leads to a productive capacity.